12 Shares Trading Near 52-Week Lows

LONDON -- I love buying cheap shares. But deciding whether a share is set for recovery or about to fall further is tough.

One of the best ways to find cheap shares is to use a statistics package. Here, I have examined the FTSE 100 to find companies trading near their lowest price in a year. But with the FTSE 100 trading 12% above its own low for the year, it has been tougher than usual to find cheap shares. These 12 companies all trade within 10% of their lowest price of the year.

Company

Price (pence)

P/E (forecast)

Yield (forecast)

Market cap (millions of pounds)

Royal Dutch Shell

2,161

8.2

5.1%

135,246

Vodafone

160

10.3

6.1%

78,714

GlaxoSmithKline

1,345

11.9

5.5%

66,303

BG

1,084

12.8

1.5%

36,874

Anglo American

1,802

13.2

2.6%

25,052

Tullow Oil

1,258

25.1

0.8%

11,414

Pearson

1,210

14.3

3.7%

9,874

WM Morrison Supermarkets

268

9.9

4.4%

6,456

Severn Trent

1,565

16.6

4.9%

3,730

Eurasian Natural Resources

280

8.1

2.4%

3,608

G4S

249

11.1

3.4%

3,540

Pennon

607

14.2

4.6%

2,250

Source: Stockopedia.

I've picked out five shares for further analysis.

1. Royal Dutch ShellRoyal Dutch Shell is one of the most successful companies you can buy today. The company has more than 100 years of history and a global footprint.

Shell's dividend is a thing of beauty. Currently, the company is forecast to pay $1.76 for 2012, putting the shares on a yield of 5.1%. That dividend has not been cut since World War II. In 2011, no other U.K. company paid out more in dividends than Shell. Few companies on the planet can have paid out more in dividends in their entire lifetime than Shell has.

Although a slight dip in earnings is expected for 2012, growth is forecast to return in 2013. The dividend is expected to rise this year and next. In the last five years, that dividend has increased by an average of 5.7% year on year.

2. GlaxoSmithKlineGlaxoSmithKline currently trades on a forward price-to-earnings ratio of 11.9. That's considerably below the FTSE 100 average of 15.3. So why the discount?

Glaxo is one of the most successful companies on the market. Through both organic growth and acquisitions, it has become a true titan share. However, the market is today expecting that future growth will be weak. Investors expect the current squeeze on government finances worldwide to affect Glaxo's ability to sell drugs. Add in fears over generic competition, and it's easy to see how the shares are trading at a discount.

Despite all of that, dividend and earnings growth are forecast for the next two years at Glaxo. This puts the shares on a prospective 2013 P/E of 11.3, with an expected yield of 5.8%.

3. WM Morrison Supermarkets Much investor attention in the grocery sector has focused on Tesco. However, I believe the bigger story is at FTSE 100 peer WM Morrison Supermarkets.

Morrison's shares today trade within just 4% of a three-year low. On a P/E of 9.9 times forecast earnings for the full year, the shares are cheaper than I can recall having seen them before.

Shares in Morrison are down 17.6% this year, as analysts have reduced their earnings estimates. One year ago, analysts expected that Morrison would report earnings of 29 pence per share for this year, but now they expect just 27 pence.

Morrison is still expected to deliver earnings and dividend growth this year and next. The share price action suggests that investors are less than convinced.

4. PennonPennon is the utility firm that owns South West Water. Pennon also owns Viridor, a recycling and waste management business. What's currently hampering Pennon is trading at Viridor.

In the company's recent interim results, Pennon reported a 10% increase in profit at South West Water and a 26.5% decline at Viridor. Despite this, the company was still able to increase EPS by 3.4% and the dividend by 6.6%. In the first six months, Viridor delivered 21% of the company's profit before tax. The market is clearly concerned that Viridor is holding Pennon back.

Given the stock's forward P/E of 14.2, investors are not too worried yet. As would be expected with a utility, the dividend yield is significant and in recent years has risen faster than inflation.

5. VodafoneVodafone, like Shell, is another big dividend payer. In the most recent Capita Dividend Monitor report, Vodafone was named as the U.K. company that had paid out the most in dividends in the third quarter of 2012. This was due, in part, to a huge special dividend from its U.S. joint venture, Verizon Wireless.

While a special dividend is not expected again this year, recent half-year results showed a 7.2% increase in the interim dividend. The company will also be spending 1.5 billion pounds buying back its own shares in the market.

Many investors do not like share buybacks. However, I see scope for the buyback creating a surge of demand for the shares. This could create a short-term share-price rise. Even if this doesn't come through, I will continue to hold my shares for that juicy yield.

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David owns shares in Vodafone but none of the other companies mentioned. The Motley Fool owns shares in Tesco and has recommended shares in Vodafone. The Motley Fool has a disclosure policy.We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.